Wednesday, January 20, 1999
Economy should stay strong in ’99
ECONOMY: California, nation will see growth, UCLA experts
predict
By Dennis Lim
Daily Bruin Contributor
An unstable stock market, financial woes in the Asian market and
the impeachment of President Clinton have shaken many economists
into believing both the nation’s and state’s economies will take a
downward plunge.
However, Larry Kimbell and Rajeev Dhawan of the UCLA Anderson
Forecast disagree.
Kimbell and Dhawan, who authored the most recent forecast,
project the nation’s economy will grow until the year 2001,
avoiding recession. They announced the results of their study at
the 47th Annual Forecast Conference last month.
"1999 looks to be a good year," Dhawan said. "It won’t be as
good as 1998, but it will be a slightly above average year."
"In our opinion, the risk of a recession in the U.S. in 1999 is
no more than one in ten," Dhawan said.
While the economy will continue to grow, it will do so at a
slower rate, according to the report. Forecasters claim the growth
of the Gross Domestic Product (GDP) will drop from a high of 3.9
percent in 1997 to 2.5 percent in 1999 and then rise again to 2.7
percent in 2001.
The report also predicts U.S. unemployment rates will increase
to 5.1 percent in 1999 and fall again to 4.7 percent in 2001.
"We see some slowing down in the economy, but that’s only from a
very high base," said Daniel Mitchell, co-director of the Anderson
Forecast. "Overall, the economy will still perform well."
The future of the economy depends on the actions of the Federal
Reserve Board (Fed). While recent interest rate cuts have helped
the economy remain robust, more cuts will be needed to maintain the
rate of growth.
"Consumer confidence is shaky, but not bad," Dhawan added. "The
Fed will continue to do its job to maintain our economic expansion,
which means keeping a watchful eye."
Though the state economy has started to feel the impact of the
nationwide decline – such as the decrease in exports to Asia and an
expected decrease in overall growth this year – California will
follow the nation’s example, growing at a slower pace, according to
the report.
Tom Leiser, executive director of the Anderson Forecast, said
the state’s boom is over.
"The Silicon Valley is showing no job growth," he said.
"California’s exports throughout the world were down 9.4 percent in
the third quarter from a year ago, which is a clear sign of
deterioration."
The decline in growth in Silicon Valley technological jobs
precipitates an economic decline in northern California, though a
recent growth spurt in the southern California economy will make up
for the decline.
Forecasters expect real personal income growth in California to
decline from 5.4 percent in 1998 to 3.1 percent in 1999 and 3
percent in 2000.
Employment will vary by industry, with decreases expected in
areas such as aerospace, high-tech and manufacturing.
According to the report, increases in the motion picture and
television industry, business services, health services,
professional services and residential construction are expected and
the state’s strong, diverse economy will save the state from
economic turmoil.
"Overall, the economy is good," Dhawan said.
"The economic fundamentals are all there. People have jobs,
interest rates are lower and the economy is growing overall."
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